Cintas Corporation Reports Third Quarter Fiscal 2007 Revenue and Earnings

Cintas Corporation (Nasdaq:CTAS) today reported revenue for the third quarter of fiscal 2007 of $905.4 million, an 8.2% increase from the previous year’s third quarter revenue of $836.4 million. Earnings per diluted share of $0.48 increased 6.7% from $0.45 per diluted share last year, and net income of $76.7 million increased from last year’s net income of $76.6 million. Current year net income is being impacted by increased interest expense related to the Company’s share buyback program. Scott D. Farmer, President and Chief Executive Officer, stated, "We posted solid growth in revenue and profits for our third quarter, delivering 8.2% revenue growth and 6.7% growth in earnings per diluted share. While all of our businesses are growing, growth in the third quarter was impacted by three things. First, the very mild winter weather into early February impacted the seasonal jacket and mat rental volume that normally occurs in this quarter. "In addition, we continue to experience economic pressure in our uniform business due to the continued off-shoring of manufacturing jobs and the ripple effect this causes to other businesses serving these operations. "Finally, our new sales force re-organization was completed at the end of the calendar year. We are encouraged about the early results and the new organization’s impact on cross-selling and overall improved revenue growth. In the short term, this change has caused disruption due to the promotion of many high-performing sales reps into management jobs, the time to train them in their new roles and the time necessary to develop their newly hired replacements. The full benefit of this new organization will be felt as these new sales representatives come up to speed, which is generally a 6-month to 1-year process.” Mr. Farmer added, "Despite these top line pressures, we achieved solid growth and delivered earnings before interest and income taxes of 14.7% of revenue. We continue to increase our product line and service offerings in all of our businesses. Revenue growth in our First Aid and Safety, Fire Protection and Document Management businesses continues to be strong as we expand our geographic presence.” Share Buyback Program During the third quarter, Cintas purchased approximately 1.4 million shares of Cintas common stock under an authorized share buyback program at a cost of $57 million. Since the inception of this program, the Company has bought back approximately 14.2 million of the outstanding shares, or approximately 8% of the total shares outstanding at the beginning of the program, at a cost of approximately $580 million. The Company continues to operate under this program and has $420 million remaining under its current authorization. Strong Balance Sheet The Company’s balance sheet continues to be strong. Despite increased debt levels related to acquisitions and the share buyback program, debt to total capitalization as of February 28, 2007, was only 30.1%. Cash and marketable securities were $157.5 million at the end of the third quarter. As marketable securities mature, it is the Company’s intention to use the funds to reduce its outstanding debt under its commercial paper program, contingent upon other cash needs. Total shareholders’ equity was $2.1 billion. Outlook Mr. Farmer stated, "Based on our third quarter results and the continuing economic pressure on our customer base, we are lowering our current year revenue and earnings guidance. We now estimate that revenue for fiscal 2007 will be $3.675 to $3.725 billion and earnings per diluted share will be $2.03 to $2.08. We expect this year will be another record year at Cintas, which would result in our 38th consecutive year of growth in sales and earnings. "We continue to be recognized by our customers and the business community in general for the services we provide our customers. In fact, we were recently named the "Most Admired Company” in the diversified outsourcing industry by FORTUNE magazine. We have consistently ranked among the top five "Most Admired” organizations in our industry sector since 2001 and this marks the fourth time we have topped this prestigious list. We have also been ranked among the "Best Employers in Canada” by Report on Business magazine in 2007 and were named "Reader’s Choice” as the best uniform supplier to the food processing industry by Food Processing magazine. This marks the fifth consecutive year that Cintas received "Golden Supplier” distinction from food industry professionals.” Mr. Farmer added, "The accolades that we receive are a direct result of our employee-partners servicing our customers every day. We are excited about the future as we continue to expand our role as the professional services company of choice.” About Cintas Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products, first aid and safety products, fire protection services and document management services for approximately 700,000 businesses. Cintas is a publicly held company traded over the Nasdaq Global Select Market under the symbol CTAS, and is a Nasdaq-100 company and component of the Standard & Poor’s 500 Index. The Company has achieved 37 consecutive years of growth in sales and earnings, to date. CAUTION CONCERNING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as "estimates,” "anticipates,” "projects,” "plans,” "expects,” "intends,” "believes,” "seeks,” "could,” "should,” "may” and "will” or the negative versions thereof and similar expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas and speak only as of the date made. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ from those set forth in or implied by this news release. Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy costs, lower sales volumes, the performance and costs of integration of acquisitions, fluctuations in costs of materials and labor including increased medical costs, costs and possible effects of union organizing activities, uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation, the cost, results and ongoing assessment of internal controls for financial reporting required by the Sarbanes-Oxley Act of 2002, the initiation or outcome of litigation, higher assumed sourcing or distribution costs of products, the disruption of operations from catastrophic events, changes in federal and state tax laws and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made. Cintas Corporation Consolidated Condensed Statements of Income (Unaudited) (In thousands except per share data)                           Three Months Ended   Nine Months Ended   Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) % Chng.   Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) % Chng. Revenue:               Rentals $665,647  $631,322  5.4    $2,037,796  $1,890,920  7.8  Other services 239,751  205,099  16.9    705,029  604,761  16.6  Total revenue $905,398  $836,421  8.2    $2,742,825  $2,495,681  9.9                  Costs and expenses (income):               Cost of rentals $371,185  $350,655  5.9    $1,129,500  $1,039,738  8.6  Cost of other services 148,386  132,796  11.7    445,944  397,024  12.3  Selling and administrative expenses 253,128  224,420  12.8    745,884  670,014  11.3  Interest income (1,339) (1,925) -30.4    (4,488) (4,959) -9.5  Interest expense 11,584  7,239  60.0    36,499  22,059  65.5  Total costs and expenses $782,944  $713,185  9.8    $2,353,339  $2,123,876  10.8                  Income before income taxes $122,454  $123,236  -0.6    $389,486  $371,805  4.8  Income taxes 45,727  46,642  -2.0    145,270  139,950  3.8  Net income $76,727  $76,594  0.2    $244,216  $231,855  5.3                  Per share data:               Basic earnings per share $0.48  $0.46  4.3    $1.52  $1.38  10.1  Diluted earnings per share $0.48  $0.45  6.7    $1.52  $1.37  10.9                  Weighted average number of shares outstanding 159,311  168,038      160,144  168,321    Diluted average number of shares outstanding 159,699  168,599      160,550  168,915        CINTAS CORPORATION SUPPLEMENTAL DATA   Three Months Ended   Nine Months Ended   Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) % Chng.   Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) % Chng. Rentals gross margin 44.2% 44.5%     44.7% 45.3%   Other services gross margin 38.1% 35.3%     36.7% 34.4%   Total gross margin 42.6% 42.2%     42.6% 42.4%   Net margin 8.5% 9.2%     8.9% 9.3%                   Depreciation and amortization $44,298  $40,484  9.4    $130,051  $118,144  10.1  Capital expenditures $47,315  $31,899  48.3    $128,636  $102,080  26.0                  Debt to total capitalization 30.1% 22.6%     30.1% 22.6%       RECONCILIATION TO GAAP MEASURES                         Three Months Ended   Nine Months Ended   Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) % Chng.   Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) % Chng. Income before income taxes $122,454  $123,236  -0.6    $389,486  $371,805  4.8  Interest income (1,339) (1,925) -30.4    (4,488) (4,959) -9.5  Interest expense 11,584  7,239  60.0    36,499  22,059  65.5  Earnings before interest and taxes $132,699  $128,550  3.2    $421,497  $388,905  8.4  Cintas Corporation Consolidated Condensed Balance Sheets (In thousands except share data)           Feb. 28, 2007 (Unaudited) May 31, 2006 (Restated)(a) ASSETS     Current assets:     Cash and cash equivalents $31,558  $38,914  Marketable securities 125,935  202,539  Accounts receivable, net 393,155  389,905  Inventories, net 227,083  198,000  Uniforms and other rental items in service 339,082  337,487  Prepaid expenses 14,926  11,163  Total current assets 1,131,739  1,178,008        Property and equipment, at cost, net 900,772  863,783        Goodwill 1,226,176  1,136,175  Service contracts, net 172,842  179,965  Other assets, net 75,960  67,306          $3,507,489  $3,425,237        LIABILITIES AND SHAREHOLDERS' EQUITY     Current liabilities:     Accounts payable $69,540  $71,635  Accrued compensation & related liabilities 57,014  50,134  Accrued liabilities 234,840  188,927  Income taxes:     Current 51,057  43,694  Deferred 39,506  51,669  Long-term debt due within one year 229,139  4,288  Total current liabilities 681,096  410,347        Long-term debt due after one year 654,376  794,454        Deferred income taxes 115,858  130,244        Shareholders' equity:     Preferred stock, no par value: 100,000 shares authorized, none outstanding -  -  Common stock, no par value: 425,000,000 shares authorized FY 2007: 172,838,020 shares issued and 158,640,697 shares outstanding FY 2006: 172,571,083 shares issued and 163,181,738 shares outstanding 130,389  120,860  Paid in capital 44,939  47,644  Retained earnings 2,443,139  2,260,917  Treasury stock FY 2007: 14,197,323 shares; FY 2006: 9,389,345 shares (580,562) (381,613) Other accumulated comprehensive income 18,254  42,384  Total shareholders' equity 2,056,159  2,090,192          $3,507,489  $3,425,237  Cintas Corporation Consolidated Condensed Statements of Cash Flows (Unaudited) (In thousands)           Nine Months Ended   Feb. 28, 2007 Feb. 28, 2006 (Restated)(a) Cash flows from operating activities:           Net income $244,216  $231,855        Adjustments to reconcile net income to net cash provided by operating activities:     Depreciation 100,036  94,014  Amortization of deferred charges 30,015  24,130  Stock-based compensation 2,746  4,507  Deferred income taxes (19,062) 7,399  Change in current assets and liabilities, net of acquisitions of businesses:     Accounts receivable 911  (14,187) Inventories (28,176) 11,984  Uniforms and other rental items in service (1,595) (11,240) Prepaid expenses (3,676) (790) Accounts payable (2,070) (9,210) Accrued compensation and related liabilities 6,880  511  Accrued liabilities (15,511) (32,293) Tax benefit on exercise of stock options (37) (706) Income taxes payable 7,400  4,947  Net cash provided by operating activities 322,077  310,921        Cash flows from investing activities:           Capital expenditures (128,636) (102,080) Proceeds from sale or redemption of marketable securities 102,871  74,820  Purchase of marketable securities (24,901) (11,346) Acquisitions of businesses, net of cash acquired (135,011) (327,983) Other (16,303) (13,830) Net cash used in investing activities (201,980) (380,419)       Cash flows from financing activities:           Proceeds from issuance of debt 252,460  173,000  Repayment of debt (167,687) (7,068) Stock options exercised 9,529  11,404  Tax benefit on exercise of stock options 37  706  Repurchase of common stock (198,949) (114,170) Other (22,843) 10,473  Net cash (used in) provided by financing activities (127,453) 74,345        Net (decrease) increase in cash and cash equivalents (7,356) 4,847  Cash and cash equivalents at beginning of period 38,914  43,196  Cash and cash equivalents at end of period $31,558  $48,043